Chapter 2: Money

Balbharati solutions for Economics 11th Standard Maharashtra State Board

Complete the correlation:

1.Primary function of money : Medium of exchange :: _____________ : Transfer of value.

SOLUTION

Primary function of money : Medium of exchange :: Secondary function of money : Transfer of value.

2._________ : Basis of Credit :: Secondary function of money : Standard of deferred payments.

SOLUTION

Contingent function of money : Basis of Credit :: Secondary function of money : Standard of deferred payments.

3.Commodity money : Shells ::__________ : Credit card.

SOLUTION

Commodity money : Shells :: Plastic money : Credit card.

4.Divisibility : Smaller denominations :: __________ Easy to carry from one place to another

SOLUTION

Divisibility : Smaller denominations :: Portability : Easy to carry from one place to another.

5.Barter system : Goods :: Modern economy :________

SOLUTION

Barter system : Goods :: Modern economy : Money

Suggest an economic term for the given statement

1.The act of exchanging goods for goods – _________

SOLUTION

The act of exchanging goods for goods – Barter exchange

2.Provision of making payments in future- ________

SOLUTION

Provision of making payments in the future-Deferred payment

3.A system that makes use of currency for facilitating payments – _________

SOLUTION

A system that makes use of currency for facilitating payments – Monetary system

4.Credit instrument through which bank deposits are transferable – _________

SOLUTION

Credit instrument through which bank deposits are transferable – Cheque

5.Monetary value stored and transferred electronically by means of computer hard drive or servers – _________

SOLUTION

The monetary value stored and transferred electronically by means of computer hard drive or servers – Electronic Money

6.Money not accounted for in the bank and not disclosed to the government -________

SOLUTION

Money not accounted for in the bank and not disclosed to the government –Black money

Choose the correct option:

1.Arrange in the order of evolution of money

Metallic money

Animal money

Metallic coins

Commodity money

a, b, c, d

b, d, a, c

d, c, a, b

c, a, b, d.

2.Arrange in the order of evolution of money

Plastic money

Paper money

Electronic money

Credit money

b, d, a, c

a, b, c, d

d, c, b, a

c, b, a, d.

Identify and explain the concept from the given illustration:

1.Vasantsheth provides coal from his shop to farmers in exchange of food grains.

SOLUTION

(A) Identified concept: Barter exchange.

(B) Explanation of concept: Barter exchange is a type of exchange in Which goods and services are exchanged for goods and services.

2.Babanrao deposits his money in a nationalized bank.

SOLUTION

(A) Identified concept: Bank money.

(B) Explanation of concept: Bank money refers to deposits Which are in the form of cash saved by people in banks.

3.Charu used her debit card to purchase a shirt for her younger brother.

SOLUTION

(A) Identified concept: Plastic money.

(B) Explanation of concept: Plastic money is a money in the form of credit cards and debit cards that is used in transaction due to advanced technology.

4.Malathi purchased a house through an agent. The agent accepted the commission in cash but did not issue a receipt to her.

SOLUTION

(A) Identified concept: Black money.

(B) Explanation of concept: Black money is a type of money which is received in cash but not accounted for and on which tax is not paid to the government.

5.To prevent misuse/fraudulent use of the national currency, a note ban is imposed on its use at certain times.

SOLUTION

(A) Identified concept: Demonetization.

(B) Explanation of concept: Demonetization is a tool of a Withdrawal of metal coins, paper notes from use as legal tender.

State with reason whether you Agree or Disagree with the following statement:

1.There are no difficulties in the barter system.

Options

Agree

Disagree

SOLUTION

No, I do not agree with this statement.

Reasons:

Lack of common measure of value : While exchanging goods for goods, there was no standard unit of account to determine the value of a commodity. e.g., it was difficult to compare two liters of milk with two kilograms of rice.

Problem of double coincidence of wants : Lack of double co-incidence of wants was one of the major limitations of barter system. For instance, person ‘A’ has cloth and he wants rice in exchange and person ‘B’ has rice but he does not want cloth in exchange. In this case exchange between ‘A’ and ‘B’ would not take place as their wants do not coincide with each other.

Indivisibility of certain goods : In barter system it was inconvenient to divide animals, house etc. into small parts, so it was difficult to fix proportion of one commodity in exchange for another commodity, e.g. Individual ‘A’ has a sack of wheat and he wants a goat in exchange. Individual ‘B’ has a goat and he wants only half a sack of wheat. In this situation exchange between the two commodities is impossible due to indivisible nature of goat, for it being a live stock.

Difficulties in storage of goods : It is necessary to store goods for future consumption. Sometimes due to perishable nature of certain goods it was difficult to store them for future. Perishable commodities like milk, eggs, fish, vegetable etc. were difficult to store. Difficulties were also experienced due to lack of space required to store heavy and bulky goods.

Problem of making deferred payments : Deferred payment means payments to be made in future. Repayment of loan was difficult due to exchange of commodities,

E.g. it was difficult to repay the perishable goods in the same condition in future.

2.There are many good qualities founds in modern currency.

Options

Agree

Disagree

SOLUTION

Yes, I agree with this statement.

Reasons:

Definitions of Money:

Prof Crowther ” Money is anything that is generally acceptable as a means of exchange and at the same time gets as a measure and a store of value”.

Prof Walker: “Money is what money does”.

The qualities of money are as follows:

General Acceptability: Anything which is used as money must be easily accepted by all for exchange purpose.

Divisibility: Money should be easily divisible into smaller denominations to facilitate small transactions.

Durability : Money should also possess the characteristic of durability. Currency notes and coins are being used repeatedly and shall continue to do so for years together on account of durability. ‘

Cognizability : Money must be easily recognised. It should have certain distinct marks so as to avoid confusion by the receiving person.

Portability : It should be easy to carry from one place to another without any difficulty, expense and inconvenience, e.g. currency notes are easily portable.

Homogeneity : Money of a particular denomination must be homogeneous or identical in its features.

Stability : Money should have (1 stable monetary value. It serves as a measure of value to exchange goods and services. These goods can be sold and purchased in future as per requirements.

3.Many tasks are accomplished by money.

Options

Agree

Disagree

SOLUTION

Yes, I agree with this statement.

Reasons:

Primary Functions of money : Money performs primary functions as a medium of exchange and a measure of value.

Secondary functions of money : It performs secondary functions of standard of deferred payments, store of value and transfer of value.

Contingent functions of money : It also performs contingent functions of estimating and dividing national income, providing basis of credit, imparting liquidity to wealth and estimating macroeconomic variables.

4.Money can be sent anywhere through electric means.

Options

Agree

Disagree

SOLUTION

Yes, I agree with this statement.

Reasons:

Plastic Money: Plastic Money is easy to use in transactions due to advanced technology. Debit cards and credit cards are used as plastic money. Further innovation in smart transactions led to the introduction of electronic money.

Electronic Money: E-money or Electronic money is a monetary value that is stored and transferred electronically through a variety of means i.e. mobile phone, tablet. Smart card computer etc. It is backed by Central Bank.

Digital wallets: Electronic money used for purchases and transactions globally. Digital wallets are also a form of stored electronic money.

Answer the following question on the basis of the following information:

Ganesh travelled to the mall by bus. He gave the conductor ₹ 10 coin for the ticket. He purchased many commodities from the mall.

At the billing counter, he gave his credit card for payment but the billing clerk informed him that only debit cards were accepted. Since Ganesh had forgotten his debit card at home, he offered to make payment by cash.

1) Identify the types of money used in the information

2) Explain any two of them.

SOLUTION

1. The types of money used in the information are metallic money, plastic money, paper money

2. The two types of money are :

Metallic money: Money made out of metals such as gold, silver, copper, aluminum, nickel, etc. is called metallic money. It is comparatively less portable and more durable.

Paper money: Money made out of paper is called paper money. It is comparatively more portable and less durable.

Chapter 1: Basic Concepts in Economics

Chapter 2: Money

Chapter 3: Partition Values

Chapter 4: The Economy of Maharashtra

Chapter 5: Rural Development in India

Chapter 6: Population in India

Chapter 7: Unemployment in India

Chapter 8: Poverty in India

Chapter 9: Economic Policy of India since

Chapter 10: Economic Planning in India

Economics 11th Standard Maharashtra State Board